NBER WORKING PAPER SERIES

BANK REGULATION AND SUPERVISION IN 180 COUNTRIES FROM 1999 TO2011

James R. BarthGerard Caprio, Jr.

Ross Levine

Working Paper 18733http://www.nber.org/papers/w18733

NATIONAL BUREAU OF ECONOMIC RESEARCH1050 Massachusetts Avenue

Cambridge, MA 02138January 2013

James R. Barth is Lowder Eminent Scholar in Finance at Auburn University, Senior Finance Fellowat the Milken Institute, and Fellow at the Wharton Financial Institutions Center. Gerard Caprio, Jr.is the William Brough Professor of Economics and Chair of the Center for Development Economicsat Williams College. Ross Levine is the Willis H. Booth Chair in Banking and Finance at Haas Schoolof Business, University of California at Berkeley, Senior Fellow at the Milken Institute and ResearchAssociate at the NBER. The authors gratefully acknowledge the painstakingly thorough assistanceprovided by Nan (Annie) Zhang, Research Assistant at the Milken Institute. This paper benefited fromthe support of the Milken Institute and the World Bank. The views expressed herein are those of theauthors and do not necessarily reflect the views of the National Bureau of Economic Research.

NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies officialNBER publications.

© 2013 by James R. Barth, Gerard Caprio, Jr., and Ross Levine. All rights reserved. Short sectionsof text, not to exceed two paragraphs, may be quoted without explicit permission provided that fullcredit, including © notice, is given to the source.

Bank Regulation and Supervision in 180 Countries from 1999 to 2011James R. Barth, Gerard Caprio, Jr., and Ross LevineNBER Working Paper No. 18733January 2013JEL No. G21,G28,O5

ABSTRACT

In this paper and the associated online database, we provide new data and measures of bank regulatoryand supervisory policies in 180 countries from 1999 to 2011. The data include and the measures arebased upon responses to hundreds of questions, including information on permissible bank activities,capital requirements, the powers of official supervisory agencies, information disclosure requirements,external governance mechanisms, deposit insurance, barriers to entry, and loan provisioning. The datasetalso provides information on the organization of regulatory agencies and the size, structure, and performanceof banking systems. Since the underlying surveys are large and complex, we construct summary indicesof key bank regulatory and supervisory policies to facilitate cross-country comparisons and analysesof changes in banking policies over time.

James R. BarthAuburn University393 Lauder Business BuildingAuburn, Alabama 36849barthjr@auburn.edu

Gerard Caprio, Jr.Department of EconomicsWilliams CollegeWilliamstown, MA 01267gerard.caprio@Williams.edu

Ross LevineHaas School of BusinessUniversity of California at Berkeley545 Student Services Building, #1900 (F685)Berkeley, CA 94720-1900and NBERRoss_levine@haas.berkeley.edu

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I. Introduction

Motivating an investigation of bank regulation and supervision is easy. One can point to

the global banking crisis of 2007-2009, the banking problems still plaguing many European

countries in 2013, and the more than 100 systemic banking crises that have devastated

economies around the world since 1970. All these crises reflect, at least partially, defects in bank

regulation and supervision.1 One can also point to research showing that banks matter for human

welfare beyond periodic crises. Banks influence economic growth, poverty, entrepreneurship,

labor market conditions, and the economic opportunities available to people.2 Thus, examining

the type and impact of bank regulatory and supervisory policies in countries is a critical area of

inquiry.

The problem, however, is that measuring bank regulation and supervision around the

world is hard. Hundreds of laws and regulations, emanating from different parts of national and

local governments, define policies regarding bank capital standards, the entry requirements of

new domestic and foreign banks, bank ownership restrictions, and loan provisioning guidelines.

Numerous pages of regulations in most countries delineate the permitted activities of banks and

provide shape and substance to deposit insurance schemes and the nature and timing of the

information that banks must disclose to regulators and the public. And, extensive statutes define

the powers of regulatory and supervisory officials over banks — and the limits of those powers.

There are daunting challenges associated with acquiring data on all of the laws, regulations, and

practices that apply to banks in countries and then aggregating this information into useful

statistics that capture different and important aspects of regulatory regimes. This helps explain

why the systematic collection of data on bank regulatory and supervisory policies is only in its

1 On documenting systemic crises, see Laeven and Valencia (2008). On the linkages between recent banking stresses and policy defects, see Barth, Caprio, and Levine (2012). 2 The literature on finance, growth, poverty, and the distribution of economic opportunities is quite large, and is reviewed by Levine (2006) and Demirguc-Kunt and Levine (2010).

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nascent stages. Yet, without sound measures of banking policies across countries and over time,

researchers will be correspondingly constrained in assessing which policies work best to promote

well-functioning banking systems, and in proposing socially beneficial reforms to banking

policies in need of improvement.

In this paper, we offer a new database on bank regulation and supervision for more than

180 countries, covering the period from 1999 through 2011. Although we do not assess the

impact of banking sector policies on banks or the broader economy, we do seek to contribute to

research on the design and implementation of policies by providing useful measures of bank

regulation and supervision. As reportedly argued by the great scientist Lord Kelvin in the 19th

century, “[I]f you cannot measure it, you cannot improve it.”3

Our database builds on four surveys sponsored by the World Bank. About sixteen years

ago, the World Bank asked us to assemble the first cross-country database on bank regulation

and supervision. With guidance and help from bank supervisors, financial economists, and

World Bank staff, we developed and implemented an extensive survey.4 We had bank

regulatory officials complete the survey—and often had several officials from the same

country complete the survey in order to verify the consistency of responses. Survey I

covered 118 countries, included over 300 questions, and was mostly completed in

1999.5 For the second survey, we extended and revised the questionnaire based on input

from World Bank staff, country officials, and academics. The World Bank released

Survey II in 2003, which provides information on bank regulatory and supervisory

policies in 2002. Survey II includes information from 151 counties covering over 400

questions. Survey III was posted on the World Bank’s website in the summer of 2007,

3 Available at http://zapatopi.net/kelvin/quotes/ 4 We sometimes use the term “regulation” to describe a wide-array of banking policies and compliance mechanisms. 5 The responses to the survey were received in 1998 through 2000, but the majority of the answers refer to policies in the year 1999.

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and it provides information on banking policies in 2006 for 142 countries. In these first

three surveys, we were extensively involved in writing the questionnaire, implementing

the survey, and assembling the data. For Survey IV, we played a less prominent role in

managing the survey.6 Specifically, we helped the World Bank conduct a major revision

of the questionnaire, but we did not implement the survey. Released in 2012, Survey IV

provides information on banking policies in 125 countries for 2011. Overall, the

surveys cover 180 countries, although the number varies from one survey to the next as

already indicated.

The dataset that we make available online differs from the survey responses

posted by the World Bank in two key regards.7 First, we devote considerable effort to

identifying and resolving inconsistencies and missing values by reviewing each of the

four surveys individually and by considering the time-series of answers for each

country. For example, there are cases when a country provides the same information

about a technical regulatory rule in Surveys I, II, and IV, but provides a different

answer for Survey III, or a country provides the same answers in Surveys I, III, and IV,

but gives a different response for Survey II. In such cases, we examine country

documents and websites to assess whether there is any reason for such odd changes and

reversals in policies to assess whether this represents a coding mistake or an actual

change in policy. As another example, for each missing data entry, we reviewed

6 More specifically, the survey was coordinated by the World Bank's María Soledad Martínez Pería and Martin Cihak, with input from numerous bank regulation experts both inside and outside the World Bank. PKF (U.K.) and Auxilium helped with compiling and following up on the survey responses. The survey was financed in part with support from the U.K. Department for International Development (DFID). 7 Our dataset is posted at http://faculty.haas.berkeley.edu/ross_levine/Regulation.htm. The World Bank posts the data from survey IV at http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTGLOBALFINREPORT/0,,contentMDK:23267421~pagePK:64168182~piPK:64168060~theSitePK:8816097,00.html. The World Bank posts the data for earlier years at http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:20345037~pagePK:64214825~piPK:64214943~theSitePK:469382,00.html.

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national publications and contacted national regulatory officials in an effort to complete

the dataset to a greater degree. Although we are certain that the resultant dataset is less

than perfect, we believe this review process has yielded a more comprehensive and

accurate set of data.

The second, and perhaps more important, dimension along which our data differs

from the survey responses posted by the World Bank involves the construction of

indexes. For each of the four surveys, we provide summary indexes of major categories

of bank regulatory and supervisory policies. This is crucial because of the size of the

surveys. There are hundreds of questions in each survey, many with sub-questions and

sub-components of those sub-questions. As a result, there are limitations to formulating

sound impressions about either cross-country differences in policies or cross-time

changes in policies from the raw survey data. Consequently, besides providing the

answers to all the individual survey questions, we aggregate the responses to individual

questions into indexes that summarize notable aspects of bank regulation and

supervision. We construct indexes of policies on capital, ownership, the activities of

banks, the entry of new banks, the powers of supervisors, the ability of private investors

to monitor bank behavior and to govern banks, deposit insurance features, loan

classification and provisioning practices, and many other areas of bank regulation and

supervision. The result of this effort is the construction of more than 50 indexes. We

provide a detailed description of the construction of the indexes in the online dataset.

The dataset also provides information on the organization of regulatory agencies

and the size and structure of the overall banking system. We document whether there is

a single regulator or multiple regulators and whether countries authorize their central

banks to play a key role in bank supervision. We also document the size of each

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country’s banking system, the concentration of the system, and the role of government

owned and foreign owned banks and how these characteristics have changed over time.

The dataset, therefore, facilitates analyses of the relationships among the organization

of national banking authorities, the details of financial regulation and supervision, and

the size and structure of the banking system. Moreover, researchers can easily combine

these data with other datasets to explore the factors that explain banking sector policies,

and the consequences of those policies for a variety of outcomes.

Besides describing the data, this paper provides a wealth of cross-country and

cross-time comparisons. We analyze changes in bank regulatory and supervisory

practices over time, examine the degree to which banking policies have converged

across countries, and document how the organization of bank regulatory authorities and

the size and structure of the banking system differ around the world. Although there is

some convergence along some dimensions of bank regulation, there remains substantial

heterogeneity in policies, organization, and structure.

The remainder of the paper is organized as follows. Section II provides an

overview of the survey. Section III discusses the indices of bank regulatory and

supervisory policies regarding permissible bank activities, capital requirements , the

powers of the official supervisory entities, transparency, private monitoring, and

external governance of banks, deposit insurance schemes, barriers to entry, loan

provisioning. Section III also examines the extent to which bank regulations and

supervisory practices have been converging across countries during the tumultuous

period since 1999. Section IV concludes.

II. An Overview of the Survey Data

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The extensive database on bank regulation and supervision (presented in the online

dataset http://faculty.haas.berkeley.edu/ross_levine/Regulation.htm) is based on four surveys

conducted by the World Bank. Appendix table 1 contains the entire list of questions from Survey

IV, while the online dataset contains the questions for each of the four surveys. As noted above,

the surveys pose questions on a wide array of bank regulatory and supervisory policies. These

include: entry into commercial banking, ownership of bank restrictions, capital standards,

allowable activities for banks, external auditing requirements, governance of banks, liquidity and

diversification requirements, deposit protection schemes, asset classification and provisioning

practices, accounting and information disclosure requirements, supervisory powers associated for

dealing with banks in financial duress, and the structure, mandate, staffing, and procedures of

supervisory agencies. In addition, some information is available on the characteristics of banking

systems, and Survey IV obtains new information on efforts designed to enable regulators to

better address issues of systemic risk and consumer protection regulations in banking.

The surveys cover a broad cross-section of countries. Figure 1 illustrates the countries

that responded to the various surveys, and Appendix table 2 provides detailed information on

those that responded to each of the surveys. Appendix table 3 lists the countries that responded to

Survey IV, sorting them by region and per capita GDP levels. It is clear that coverage is fairly

good, with countries represented from all parts of the world and all levels of income. The fewest

number of countries responding are in the lower income category with small populations. For the

four surveys, 118 countries responded to Survey I, 151 countries responded to Survey II and 143

countries responded to both Surveys III and IV. Of these countries, 73 of them responded to all

four surveys. Barth, Caprio, and Levine (2001, 2006, and 2008) assess the results of Survey I

through III, while Martinez-Peria and Cihak (2012) discuss some of the data from Survey IV.

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Before defining and reviewing the bank regulation and supervision data, we begin in

Table 1 by documenting cross-country differences in key banking system indicators, using

Survey IV for illustrative purposes. As shown, Table 1 provides information on banking system

size, the number of banks, the proportion of banking assets in government owned banks (where a

bank is considered government owned if 50 percent or more of the shares are controlled by the

government), the proportion of banking assets in foreign owned banks, the number of official

bank supervisors per bank in the country, and the percent of the ten largest banks in a country

that are rated by one of the major international ratings agencies.

For many of the banking system indicators depicted in Table 1, the range of variation is

impressive. Some examples will illustrate this point. Luxemburg has the highest ratio of bank

assets-to-GDP at a striking 1,942 percent, while Iraq has the lowest ratio at 18 percent.8 These

figures are not surprising given that Luxemburg is a very small country with internationally

active banks, whereas Iraq is still recovering from a recent war. The share of bank assets that is

foreign owned ranges from a high of 100 percent in several offshore financial centers to 0

percent in Ethiopia. In the case of government ownership of bank assets, the share ranges from 0

percent for several countries to 74 percent in India (China did not respond to this question, but

available information indicates the figure exceeds 90 percent. In the 2007 survey China did

respond and reported the share was slightly less than 70 percent, but this only captured the four

big state owned banks. The figure exceeds 90 percent even earlier if one includes all state or

government owned banks). Banking density also seems to vary to an astonishing degree, though

much less so once one removes offshore banking centers, such as the Cayman Islands, the Isle of

8 One problem that arises when comparing bank assets across countries is that different countries may use different accounting standards. As appendix table 7 shows, most countries use International Financial Reporting Standards (IFRS), while only 6 use U.S. GAAP. When one converts U.S. bank assets from U.S. GAAP to IFRS, total bank assets increase by roughly $5 trillion in 2012, which is largely due to measuring derivatives on a gross rather than net basis (see Barth and Prabha, 2012). The biggest effect that different accounting standards will have in measuring a country’s bank assets is likely to be in the United States, and even then concentrated at the biggest banks, which account for the bulk of all derivatives.

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Man, and Seychelles. The median number of banks per 100,000 people is 0.4, with the lowest

figure being 0.01 for India. Large banks control a substantial share of bank assets, with the

median share of the top five banks being 73 percent, and yet although most or all big banks are

audited by international (so it is hoped, more arms-length) firms, in a distressing number of cases

no large banks are so audited, such as in Botswana and Iceland.

Besides providing a snapshot of the structure of banking systems in 2011, the data also

illustrate the evolution of banking systems since 1999. As shown in Figure 2, many countries

have experienced rapid growth in the ratio of bank assets to GDP from Survey I (1999) to Survey

IV (2011). Figure 2 provides information on all countries for which there are data for both

Surveys I and IV. In Figure 2, we graph all countries with greater than 1 percent growth from

Survey I to Survey IV in the left panel and all countries with less than -1 percent growth in the

right panel. In 44 countries the ratio increased, while it decreased in 8 countries. Figure 3 shows

the maximum ratio of bank assets to GDP for each country across all four surveys and the survey

when this maximum occurred. It is also seen in the figure that most of countries reported the

highest ratio in Survey IV.

Bank concentration and ownership have also changed materially. We again illustrate

changes in concentration and ownership between Survey I and Survey IV for all countries that

have information for both surveys. Figure 4’s right panel shows that some countries have

experienced sharp reductions in bank concentration, which is measured by the share of assets in

the five largest banks. Most of the countries that experienced these pronounced reductions in

concentration have small financial systems. Figure 4’s left panel shows even more countries

experienced notable increases in concentration, including Germany, Malaysia, Turkey, Spain,

Italy, Brazil, Chile, Australia, South Korea, Canada, and the United States. Across all countries

that provided data on bank concentration for Survey I and Survey IV, the average level of bank

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concentration was 66 percent in Survey I and 70 percent in Survey IV, indicating a 4 percentage

point increase in average bank concentration.

In many countries, state ownership of banks also changed appreciably between Survey I

and Survey IV, where state ownership is defined as the proportion of banking assets in

government owned banks (where a bank is considered government owned if 50 percent or more

of system’s assets are owned by the government). Figure 5 shows that a substantial number of

countries experienced large decreases in state ownership, especially in such big countries as

Germany, India, and Russia, where state ownership was particularly large in 1999. As with all of

the figures, we include those countries with data in both Survey I and Survey IV. A number of

countries also reported large increases in the share of bank assets controlled by state owned

banks. The most striking case is the United Kingdom with an increasing share amounting to 26

percent in 2010, due to the bailout of the Royal Bank of Scotland in 2008, while the

corresponding share was 0 percent in the first survey. For those countries with data on state

ownership of banks for both Survey I and Survey IV, the average percentage of total bank assets

in state owned banks was 21 percent in 1999 and 15 percent in 2011.

One of the most significant changes, and one that has greatly complicated the world of

bank regulation and supervision, is the dramatic increase in the share of total bank assets in

foreign owned banks, as shown in Figure 6. The share of total bank assets in foreign owned

banks is defined as the proportion of banking assets in foreign owned banks, where a bank is

considered foreign owned if 50 percent or more of system’s assets are foreign owned. From

Survey I to Survey IV, 76 percent of the countries experienced an increase in the share of bank

assets in foreign owned banks. Across all countries that provided data for both surveys, the

average percentage of bank assets in foreign owned banks was 47 percent in 2011, up from 29

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percent in 1999. This substantial increase emphasizes the importance of cross-country

coordination in the resolution of big banks that operate globally.

Beyond these general characteristics of banking systems, there are also cross-country

differences in the organization of bank regulatory and supervisory institutions. Tables 2-4

provide information on whether countries have single or multiple supervisory authorities for

commercial banks, whether the bank supervisor is in the central bank or a separate agency (or

both, in the case of multiple supervisors), and whether there is a single financial supervisor for

the entire financial system, respectively. Table 2 shows that the vast majority of countries have a

single bank supervisory authority: 126 countries have a single bank supervisory authority, while

only ten have multiple authorities, including the United States.

Table 3 provides information on whether the central bank is a bank supervisory authority.

It is seen that in 89 countries the central bank is the only such authority. In contrast, in 38

countries the central bank is not a supervisory authority at all. The remaining 9 countries that

provide information indicate that the central bank is one among multiple supervisors, with the

United States being one of these countries.

Since banks are not the only financial firms, information was also requested as to whether

a country has a single financial supervisory authority or multiple authorities. Table 4 provides

information on the scope of coverage by financial supervisory authorities in countries. In 101

countries there are multiple authorities covering the financial sector, while in 25 countries there

is a single authority covering the entire financial sector. Most of the countries with a single

authority are relatively small in terms of both population and GDP.

III. Aggregating the Data: The Art and Science of Forming Indices

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There are formidable conceptual challenges to aggregating the information contained in

the answers to detailed questions from the surveys into meaningful and usable measures of bank

regulatory and supervisory practices. While fully aware of the challenges, we have formulated a

set of indexes with the goals of measuring major features of each country’s regulatory and

supervisory regime and gauging how these features have evolved over time. Table 5 shows a full

list of variables in the dataset with the definition, quantification, and specific questions for each

variable.

In the paper, we describe some of the indexes and provide some cross-country and time-

series comparisons. In the online data file, we show precisely how each aggregate index is

constructed from the individual components of the survey. We also organize the data file, so that

it is easy for researchers to construct their own indexes from the individual responses.

III. A. Scope of Bank Activities and Financial Conglomerate Variables

National regulators license banks and specify permissible activities. Countries may

restrict banks to a narrow range of activities, or allow them to engage in a broad array. Since the

scope of activities helps define what is meant by a “bank” and since the scope of permissible

activities differs across countries, banks are not the same across countries. Furthermore, bank

regulations define the extent to which banks and nonbanks may combine to form financial (i.e.,

bank and nonbank financial) or mixed (i.e., bank and nonbank nonfinancial) conglomerates.

From the survey questions, we construct indexes of the degree to which national

regulations restrict banks from engaging in (1) securities activities, (2) insurance activities, and

(3) real estate activities. More specifically, securities activities refers to securities underwriting,

brokering, dealing, and all aspects of the mutual fund industry. Insurance activities involve

insurance underwriting and selling. And real estate activities refer to real estate investment,

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development, and management. The index values for securities, insurance, and real estate range

from 1 to 4, where larger values indicate more restrictions on banks performing each activity. In

particular, 4 signifies prohibited, 3 indicates that there are tight restrictions on the provision of

the activity, 2 means that the activity is permitted but with some limits, and 1 signals that the

activity is permitted.

For each of these three bank activity indexes, Figure 7 provides information on the

distribution of countries by the degree of restrictiveness for Survey I and Survey IV. The data

file contains this information by country for all four surveys. The figure shows that securities

activities are the least restricted of the bank activities, while real estate activities are the most

restricted. Focusing on Survey IV, only 9 of 124 countries actually prohibit banks from engaging

in securities activities. In contrast, 42 countries prohibit them from engaging in real estate

activities. With respect to insurance, 19 countries prohibit banks from engaging in this type of

activity. Guyana and Uganda are the only countries that completely prohibit banks from

engaging in all three activities (securities, insurance, and real estate). However, 12 other

countries either completely prohibit or put specific some restrictions on all of these activities.

As illustrated, there is great cross-country variability in the degree to which countries

restrict banks from engaging in different activities. The regulatory notion of a bank, therefore,

differs markedly across countries — and, this definition changes over time within the same

country, which is also illustrated in Figure 7. For example, Kosovo, Moldova, Slovakia, United

Arab Emirates and Uruguay prohibit insurance and real estate activities but allow unrestricted

securities activities, while three countries grant banks unrestricted securities, insurance, and real

estate powers – Hong Kong, Jersey and Switzerland. All of these countries, moreover, have a

single bank supervisory authority.

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We also constructed two indexes of the degree to which national regulations (1) restrict

banks from owning nonfinancial firms and (2) restrict nonfinancial firms from owning banks.

These particular regulations are quite important and, needless to say, controversial. Figure 7

shows that the degree of overall financial conglomerates restrictiveness displays substantial

variation across countries. Based on Survey IV, bank ownership of nonfinancial firms is more

restricted than nonfinancial firm ownership of banks. About 30 percent of the countries prohibit

bank ownership of nonfinancial firms, whereas only one of 124 countries prohibits ownership of

banks by nonfinancial firms. Fifteen percent of the countries, including the U.S., restrict the

mixing of banking and commerce.

Comparing Survey IV to Survey I, Figure 7 shows that there was a substantial increase in

the number of countries prohibiting bank ownership of nonfinancial firms, an increase to 38 from

8. The opposite is the case for prohibiting banks from engaging in insurance activities, with a

decrease to 19 countries from 40. There was not much of a change with respect to regulatory

restrictions for the other variables in the figure over the thirteen year period from Survey I to

Survey IV. Overall, it seems that most countries allow some co-mingling of bank and non-

financial firms.

We also construct an index of the overall restrictions on bank activities that measures the

extent to which a bank can both engage in securities, insurance, and real estate activities and own

nonfinancial firms. We include restrictions on banks owning nonfinancial firms in this overall

index of because regulations on the extent to which banks may own nonfinancial firms affects

the ability of a bank to diversify revenue streams and is therefore similar in some ways to the

regulatory restrictions on other activities. Based on four of the indexes defined above, this index

of overall restrictions on bank activities can potentially range from 4 to 16, with higher numbers

indicating greater restrictiveness.

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Figure 8 provides information on the change in the index of overall restrictions on bank

activities from Survey I to Survey IV. Positive numbers indicate an increase in restrictions. As

with many features of bank regulation and supervision, there is great cross-country

heterogeneity. Of the countries in the figure, 43 of them increased restrictions and 36 countries

decreased restrictions. In the case of another 18 countries there was no change. The country that

increased restrictions the most was Seychelles, while the country that decreased restrictions the

most was Romania. For those countries with data used to construct index of overall restrictions

on bank activities for both Survey I and Survey IV, the average index value goes from 7.4 down

to 7.2, which means that on average countries decreased overall restrictions from 1999 to 2011.

We also examine whether countries tightened or eased the overall restrictions on bank

activities following the global financial crisis. This is done by comparing the index values for

Survey III and IV. Table 6 shows that 80 percent of the countries tightened such restrictions

following the crisis.

III. B. Capital Regulations

Capital regulations represent a mainstay of banking sector policies around the world.

Many rules and policies determine the precise amount and nature of capital that banks must hold.

In terms of the amount of capital, this is typically characterized in terms of the ratio of capital to

total banks assets. In terms of the nature of capital, there are policies concerning the definition of

capital beyond cash or government securities, the definition and valuation of bank assets, and

whether the regulatory and supervisory authorities verify the sources of capital.

We construct indexes of the stringency of bank capital regulations that measure the

amount of capital banks must hold and the stringency of regulations on the nature and source of

regulatory capital. It is composed of the answers from specific survey questions: (1) Is the

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capital-asset ratio risk weighted in line with the Basle I guidelines? (2) Does the minimum

capital-asset ratio vary as a function of an individual bank’s credit risk? (3) Does the minimum

capital-asset ratio vary as a function of market risk? (4) Before minimum capital adequacy is

determined, which of the following are deducted from the book value of capital? Market value of

loan losses not realized in accounting books? Unrealized losses in securities portfolios? Or

unrealized foreign exchange losses? (5) What fraction of revaluation gains is allowed as part of

capital? (6) Are the sources of funds to be used as capital verified by the regulatory/supervisory

authorities? (7) Can the initial disbursement or subsequent injections of capital be done with

assets other than cash or government securities? and (8) Can initial disbursement of capital be

done with borrowed funds? Larger values of this index of bank capital regulation indicate more

stringent capital regulation. The maximum possible value is 10, while the minimum possible

value is 0. Figure 9 indicates the change in the index of bank capital regulations from Surveys I

to IV, where positive numbers indicate an increase in restrictions on bank capital. Of the 107

countries, 65 increased the stringency of capital regulation, 28 decreased them, and 14 made no

changes.

Since Survey IV covers the period after the emergence of the global financial crisis and

the introduction of Basel III, we compare capital regulation before and after the crisis by

examining the change in the capital regulatory restrictions index from Survey III to Survey IV.

Table 7 shows that 79 percent of the countries increased the stringency of their capital

regulations following the crisis, including the United States. Note, however, that at least up to the

time of the latest survey, Austria, Mexico and the United Kingdom had reduced the stringency of

their capital regulations in the aftermath of the crisis.

III. C. Official Supervisory Power

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An important aspect of supervision is whether the supervisory authorities possess the

power to obtain information from banks and take an assortment of actions to change the behavior

of banks based on the assessments of the official supervisory authority. In some cases, the

authorities might even be required to take corrective action to address a problem, and in other

cases the authorities may have the discretionary power to act as they see fit. Courts, moreover,

may intervene in some instances and thereby limit, delay or even reverse actions taken by the

supervisory authorities, but in other cases, the courts have less power over the regulatory and

supervisory agencies.

We construct an index of official supervisory power to measure the degree to which the

country’s bank supervisory agency has the authority to take specific actions. It is composed of

the answers from specific survey questions: (1) Does the supervisory agency have the right to

meet with external auditors about banks? (2) Are auditors required to communicate directly to

the supervisory agency about elicit activities, fraud, or insider abuse? (3) Can supervisors take

legal action against external auditors for negligence? (4) Can the supervisory authority force a

bank to change its internal organizational structure? (5) Are off-balance sheet items disclosed to

supervisors? (6) Can the supervisory agency order the bank’s directors or management to

constitute provisions to cover actual or potential losses? (7) Can the supervisory agency suspend

the directors’ decision to distribute (a) dividends, (b) bonuses, and (c) management fees? (8) Can

the supervisory agency supersede the rights of bank shareholders and declare a bank insolvent?

(9) Can the supervisory agency suspend some or all ownership rights? (10) Can the supervisory

agency (a) supersede shareholder rights, (b) remove and replace management, and (c) remove

and replace directors? The official supervisory index has a maximum value of 14 and a minimum

value of 0, where larger numbers indicate greater power.

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Figure 10 indicates the change in the index of official supervisory powers from Surveys I

to IV, where positive numbers indicate an increase in such powers. On balance, slightly more

countries weakened the powers of their official supervisory agencies than strengthened those

powers. A number of countries indicated no change, including the United States. One might

think that whether a country weakens or strengthens official supervisory powers would be

important for helping predict whether banks would operate safely and soundly. However, an

increase in supervisory power was not found to be helpful in promoting bank development,

performance, or stability in our earlier work (Barth, Caprio, and Levine, 2006). Indeed, we found

that in countries with weak democratic institutions, official supervisory power was associated

with increased corruption in the lending process with no corresponding beneficial effects on

stability.

To determine whether countries tightened increased or decreased official supervisory

powers following the global financial crisis, we compare the index values for Survey III and IV.

Somewhat surprisingly, Table 8 shows that 45 percent of the countries decreased such powers.

The surveys also provide information on whether supervisory authorities must report as

well as take mandatory actions when they identify infractions of prudential regulations. Table 9

provides information in this regard. It is interesting that 127 countries indicate that infractions

must be reported when found, while in only 11 countries is this not the case. The number of

countries that require mandatory actions to be taken when infractions are found is 105, while 33

countries do not require mandatory actions. Israel is a country that neither requires the reporting

of infractions nor mandatory actions when they are found. The United Kingdom and the United

States both require the reporting of infractions, but of these two countries, only the United States

requires mandatory actions. The table also provides information on whether supervisors are

18

legally liable for their actions. Only 23 countries report that this is the case, whereas in 118

countries supervisors are not held liable.

III. D. Private Monitoring and External Governance

III. D. 1 Private Monitoring

Regulatory and supervisory policies can also shape the incentives and ability of private

investors to monitor and exert effective governance over banks. For example, the degree to

which supervisory agencies require banks to obtain certified audits and/or ratings from

international-rating agencies and disseminate accurate, comprehensive and consolidated

information on the full range of their activities and risk-management procedures may influence

the quality of private sector scrutiny of banks. To the extent that national regulatory and

supervisory authorities make bank directors legally liable if information is erroneous or

misleading might similarly influence the quality of information provided by banks to private

investors and hence the ability of those investors to monitor and govern banks. And, the

incentives of private investor to obtain and process information and then exert governance over

bank executives will surely be shaped by the degree to which countries have either credibly

demonstrated that they will not bailout investors of failed banks or indicated their willingness to

protect those investors. Thus, private monitoring is not simply an absence of regulations and

supervision. Official supervisory policies also shape private monitoring by forcing information

disclosure and defining the liability and hence incentives of private investors.

We construct an index of private monitoring to examine the degree to which regulatory

and supervisory policies encourage the private monitoring of banks that builds on an array of

individual questions contained in the survey. Specifically, the private monitoring index is

composed of information on (1) whether bank directors and officials are legally liable for the

19

accuracy of information disclosed to the public, (2) whether banks must publish consolidated

accounts, (3) whether banks must be audited by certified international auditors, (4) whether 100

percent of the largest 10 banks are rated by international rating agencies, (5) whether off-balance

sheet items are disclosed to the public, (6) whether banks must disclose their risk management

procedures to the public, (7) whether accrued, though unpaid interest/principal, enter the income

statement while the loan is still non-performing, (8) whether subordinated debt is allowable as

part of capital, and (9) whether there is no explicit deposit insurance system and no insurance

was paid the last time a bank failed. Thus, the maximum value of the private monitoring index is

12 and the minimum value is 0, where larger values indicate greater regulatory empowerment of

the monitoring of banks by private investors.

Figure 11 indicates the change in the index of private monitoring from Survey I to IV.

Positive values in this figure indicate that private monitoring strengthened over time, while

negative values signify a reduction in the degree to which official policies support the monitoring

of banks by private investors. As shown, there is great diversity in terms of whether regulations

associated with private monitoring have strengthened or weakened. Once again, relatively small

countries such as the Philippines, Finland and Tajikistan were generally those that reduced

private monitoring to the greatest degree, while comparatively large countries like France, India

and the United States increased it the most. On average, there was a slight increase in private

monitoring, such that average value of the private monitoring index was 7.7 in 1999 and it was

7.9 in 2011.

To determine whether countries increased or decreased private monitoring powers

following the global financial crisis, we compare the index values for Survey III and IV. Table

10 shows that about half of the countries increased such powers, with the other half decreased

20

the extent to which official regulatory and supervisory policies encourage and facilitate the

monitoring of banks by private investors.

III. D. 2 External Governance

Building on the Private Monitoring index, we construct a broader index of the degree to

which regulations facilitate external governance by debt and equity holders. The index is

composed of the answers from specific survey questions: (1) Is an audit by a professional

external auditor required for all commercial banks in your jurisdiction? (2) Are specific

requirements for the extent or nature of the audit spelled out? (3) Are auditors licensed or

certified? (4) Do supervisors get a copy of the auditor’s report? (5) Does the supervisory agency

have the right to meet with external auditors to discuss their report without the approval of the

bank? (6) Are auditors required by law to communicate directly to the supervisory agency any

presumed involvement of bank directors or senior managers in illicit activities, fraud, or insider

abuse? (7) Can supervisors take legal action against external auditors for negligence? (8) Does

accrued, though unpaid, interest/principal enter the income statement while the loan is still

performing? (9) Are financial institutions required to produce consolidated accounts covering all

bank and any non-bank financial subsidiaries? (10) Are off-balance sheet items disclosed to the

public? (11) Must banks disclose their risk management procedures to the public? (12) Are bank

directors legally liable if information disclosed is erroneous or misleading? (13) Does accrued,

though unpaid, interest/principal enter the income statement while the loan is still non-

performing? (14) Are accounting practices for banks in accordance with International

Accounting Standards (IAS)? (15) Are accounting practices for banks in accordance with U.S.

Generally Accepted Accounting Standards (GAAS)? (16) Is subordinated debt allowable as part

of capital? (17) Is subordinated debt required as part of capital? (18) Do regulations require

21

credit ratings for commercial banks? (19) What percentage of the top ten banks is rated by

international credit rating agencies (e.g., Moody's, Standard and Poor’s)? and (20) How many of

the top ten banks are rated by domestic credit rating agencies? The values of the external

governance index range from 0 to 19, with higher values indicating a great degree of external

governance.

Figure 12 indicates the change in the index of external governance from Survey I to IV,

where the positive values indicate an increase of external governance. Of the 42 countries

providing data for both Survey I and Survey IV, 37 tightened external governance, 3 (Malaysia,

Panama, and Fiji) eased it, and 2 (Argentina and Finland) made no changes. On average, the

index values increased from 12.6 in 1999 to 15.3 in 2011.We then examine how counties

changed their external governance following the recent banking crisis. Table 11 shows

information of countries with data available for both Survey I and IV. Of 33 countries, 22

tightened external governance, and 11 eased it from 1999 to 2011.

III. E. Explicit Deposit Insurance Schemes

Policies associated with insuring the deposits of banks may also shape the performance of

banking systems. Countries often adopt deposit insurance to prevent bank runs. When depositors

attempt to withdraw their funds all at once, some illiquid but solvent individual banks may be

forced into insolvency and there is also the potential for contagious bank runs on otherwise

healthy banks. Thus, many countries enact deposit insurance schemes to reduce the probability

of systemic crises. But, deposit insurance can encourage excessive risk-taking by banks by

reducing the incentives of depositors to monitor bank executives and curtail excessive risk

taking. Thus, the precise design of deposit insurance schemes, including coverage limits, scope

22

of coverage, whether coinsurance is a feature, sources of funding, premia structure, and

management and membership requirements, may materially shape bank and depositor behavior.

We construct an index of deposit insurer power to measure each country’s deposit

insurance regime and to trace its evolution from 1999 to 2011. In particular, the deposit

insurance index is composed of the following individual questions from the surveys: (1) Does the

deposit insurance agency/fund administrator have the bank intervention authority as part of its

mandate? (2) Does the deposit insurance authority by itself have the legal power to cancel or

revoke deposit insurance for any participating bank? (3) Can the deposit insurance agency/fund

take legal action for violations against laws, regulations, and bylaws (of the deposit insurance

agency) against bank directors or other bank officials? and (4) Has the deposit insurance

agency/fund ever taken legal action for violations against laws, regulations, and bylaws (of the

deposit insurance agency) against bank directors or other bank officials? The values of the

deposit insurance index range from 0 to 4, with higher values indicating more power.

Figure 13 indicates the change in the index of deposit insurance from Surveys I to IV.

The positive numbers indicate an increase of deposit insurance power. There are 75 countries

providing data for both Surveys I and IV. Of these countries, 22 increased the power and 18

decrease it, while 35 countries made no changes. On average, there was a very slight increase in

deposit insurance power, such that the average value of the index was 1.06 in 1999 and 1.08 in

2011.

As Table 12 shows, 98 of the 143 countries responding to Survey IV had established a

deposit insurance protection system for banks. Such schemes are most common among high-

income countries and least common among low-income countries. The table also shows that

there are a number of differences in (1) whether participation by banks is compulsory and (2) the

scope of coverage. Of the countries providing data, 95 require domestic banks to participate,

23

while 86 (62) also require foreign bank subsidiaries (foreign bank branches) to participate.

Roughly three-fourths of the countries provide coverage for foreign currency deposits but at the

same time exclude interbank deposits. The most common type of deposit insurance coverage is

per depositor per institution rather than per depositor or per depositor account.

We next examine how countries changed their deposit insurance regimes following the

recent banking crisis. Since Survey III provides information just before the global financial crisis

and Survey IV provides similar information right after the crisis fully emerged, we provide

information on whether or not changes were made in the coverage provided by the deposit

insurance system in selected advanced countries. All these countries suffered a banking crisis,

which makes it useful to determine whether any important changes were made in their deposit

insurance schemes. Table 13 shows that four countries that reported that they had a formal

coinsurance feature as part of their deposit insurance schemes prior to the global financial crisis

eliminated this feature in 2011. In addition, two countries that had not had deposit insurance fees

based on some assessment of risk made a switch to include them from Survey III to Survey IV,

while one country did the reverse.

An additional point that should be made before concluding this section is the resolution

of insolvent banks. To the extent that a bank is a subsidiary of a holding company, an issue that

arises is whether the deposit insurance supervisory authority or other regulatory authority is able

to seize the holding company or just a subsidiary bank. In the United States, the regulatory

authorities have been only able to seize and resolve subsidiary banks, not the parent holding

companies, until the passage of the Dodd-Frank Act in 2010. In this case, insolvent banks were

seized and resolved by the regulatory authorities, while the parent holding companies were

handled by bankruptcy courts. Information provided by Survey IV indicates that in 73 countries

24

the insolvency framework is the same for holding companies and banks, but different in 59

countries.

III. F. Restrictions on Entry into Banking

The degree of competition in banking depends importantly on entry barriers. Regulators

in most countries do not allow just anyone to enter the banking system, but rather screen entrants

to better assure they are “fit and proper.” By imposing the fairly basic requirements identified

above before a banking license is accepted or rejected, those allowed to enter may be of higher

quality and thereby enhance the overall performance of the banking industry.

We construct an entry into banking index to measure each country’s requirements of

entering into banking and to trace its evolution from 1999 to 2011. In particular, this index is

based on whether or not the following information is required of applicants for a banking license:

(1) Draft by-laws; (2) Intended organizational chart; (3) Financial projections for first three

years; (4) Financial information on main potential shareholders; (5) Background/experience of

future directors; (6) Background/experience of future managers; (7) Sources of funds to be used

to capitalize the new bank; and (8) Market differentiation intended for the new bank. The values

of the index of entry into banking range from 0 to 8, with higher values indicating greater

stringency.

Figure 14 identifies the change in the index of entry into banking from Survey I to IV.

The selected countries are the ones providing data both for Survey I and IV. Among the 136

countries, 35 countries increased the entry into banking requirements, 16 decreased the

requirements, and 85 countries did not make changes. On average, there was a slight increase in

entry into banking requirements, such that the average value of the index was 7.5 in 1999 and it

was 7.8 in 2011.

25

III. G. Additional information

Clearly, the number of questions asked in all four surveys is far too large to provide an

adequate discussion of all of them in this paper. Indeed, it took over 100 pages in our book

(Barth, Caprio, and Levine, 2006, Chapter 3) that focused only on Survey I to describe the data.

The online dataset that we make available, however, provides details on each question in each

survey, the formulas for constructing each of the indexes discussed above, and all of the

information on several other indexes of bank regulation and supervision. Thus, this paper

provides an introduction to the online dataset, but is not a complete description of every aspect of

these data.

To provide additional summary information on Survey IV and advertise the enormous

heterogeneity of bank regulatory and supervisory policies across countries, Appendix Tables 4

and 5 and Table 14 give the values of key regulatory and supervisory policies for different cuts

of the data. The minimum and maximum values in Appendix Table 4 are useful because they

help indicate whether an item is measured as an index, in days, as a percentage or as a pure

number. This table shows that there is substantial variation in the values of the different items

across the various countries, with the number of countries providing information also indicated.

Appendix Table 5 provides the average values for the same items included in the Appendix

Table 4 with the countries grouped into different categories based on income level, development

status and whether or not an offshore center. Table 14 further advertises the lack of uniformity in

various regulations and supervisory practices in countries around the world.

III. H. Some new information in Survey IV

Survey IV contains all the questions in the three earlier surveys that are necessary to

construct the indices discussed earlier as well as other indices discussed more fully in Barth,

26

Caprio, and Levine (2006) and provided in the online dataset. In addition, the latest survey

includes some new and important questions that were asked due to the global financial crisis. In

particular, given the concern over systemic risk, questions are added to determine what countries

are doing in an effort designed to better assess systemic risk within the banking sector. Of 133

countries, 90 of them indicate that they have a specialized department dealing with financial

stability and systemic supervision, while the remaining 43 reported they do not have such a

department. Countries in which these departments exist include Austria, Belgium, France,

Greece, Ireland, the Netherlands, Spain, and the United Kingdom. Denmark, Switzerland and the

United States report not having established a specialized department dealing with financial

stability and systemic supervision.

Figure 15 shows the factors that countries consider in assessing systemic risk within the

banking sector. The factor that regulators in the most countries consider is bank capital ratios

(113), while the least mentioned factor is stock market prices (46). Countries that report that all

of the factors are considered include Austria, Iceland, the Netherlands, Portugal, the United

Kingdom and the United States. These are advanced countries that suffered a banking crisis.

Some other advanced economies that suffered a banking crisis, like France, Germany and

Ireland, do not indicate that they consider any of the factors indicated in the figure.

There are still other new questions asked in Survey IV that are important, especially

given the most recent global financial crisis. Some of the questions as well as the number of

countries responding and their collective answers are reported in Table 15. These questions focus

on external auditors, remuneration or compensation, insolvency framework for bank holding

companies and banks, stress tests, counter-cyclical regulations, and the supervision of the

systemic institutions verses non-systemic ones. Once again, there is in most cases a substantial

divergence from uniformity in the answers. Focusing on just the advanced countries listed in

27

Table 12, Austria, Germany, and Switzerland report that supervisors delegate part of their

supervisory tasks to external auditors, whereas France, Spain, the United Kingdom and the

United States do not. All of these advanced countries report that remuneration or compensation

is evaluated as part of the supervisory process to ensure that they do not lead to excessive risk

taking, with the exception of Belgium as regards the board of directors. The same countries,

moreover, all report that they conduct stress tests and do so at the bank level. Six of the 16

countries extend the tests to the system-wide level. The last item to be mentioned here is whether

countries impose any restrictions or limits on the size of banks to address the issue of systemic

risk. Of the 63 countries providing information, only 11 report such size restrictions or limits,

including Iceland and Ireland.

The last new piece of information that is provided in Survey IV is the statutory corporate

tax rate on domestic bank income. Figure 16 shows the substantial variance in tax rates among

the countries, which range from a low of 0 to a high of 45 percent. Guyana reports the highest

tax rate, while six other countries report that there is no tax imposed on domestic bank income.

As regards the United States, it reports the fifth highest tax rate, with 108 countries reporting

lower tax rates.

III. I. Convergence

Since Survey I in 1999, national regulatory authorities around the world have met at

various international institutions and conferences. Thus, it is natural to assess whether bank

regulatory and supervisory practices have converged across countries. Though there are many

ways to assess convergence, Table 16 provides some simple summary statistics.

Table 16 provides information on the degree to which the major bank regulatory survey

indexes that we constructed have tended to converge from Survey I (1999) to Survey IV (2011).

28

We provide information on (i) Overall restrictions on bank activities, (ii) Entry into banking

requirements, (iii) Bank capital regulations, (iv) Official supervisory powers, (v) Private

monitoring, and (vi) External governance. For each index, we only include countries for which

we have data for Survey I and IV. We provide two types of measures of convergence. First, we

simply provide the normalized standard deviation in Survey I and Survey IV for each index.

Second, we assess the number of countries that are x% different from the median value, where x

equals 10%, 25%, 30%, and 50%.

Although for a few of the indexes, the data suggest material convergence, Table 15 does

not suggest broad-based convergence of bank regulatory and supervisory practices. In particular,

the indexes (i) Entry into banking requirements, (ii) Bank capital regulations, and (iii) External

governance exhibit notable convergence in that there is less divergence across countries in

Survey IV than there is in Survey I. Such convergence is less noticeable in the other regulatory

and supervisory indexes. Overall, as of 2011, there is greater cross-country divergence in bank

regulation and supervision.

IV. Conclusions

In this paper and the associated online database, we provide a new database on bank

regulatory and supervisory policies in 180 countries that covers the period from 1999 through

2011. This database builds directly on four World Bank surveys of bank regulation and

supervision around the world. The database that we offer differs from the underlying survey data

in two key respects: we address many inconsistencies and missing observations in the core

survey responses and we construct a range of indexes to provide information on key banking

policies. Providing the indexes is crucial for comparing bank regulatory and supervisory policies

across countries and for assessing how these policies change over time because the underlying

29

surveys are enormous and complex. The surveys include hundreds of questions, such that it is

difficult to form impressions of banking sector policies by examining these individual questions

one by one. Thus, we construct summary indexes from the individual questions to measure key

features of the regulatory and supervisory approaches to what banks can do, capital standards,

the powers of official supervisory agencies, regulations on the entry of new banks, the degree to

which the authorities encourage the monitoring of banks by private investors, the nature of the

deposit insurance regime, and an assortment of other policies towards banks.

There is substantial heterogeneity of bank regulatory and supervisory policies across countries.

And, although there has been some convergence over the last dozen years for some types of

banking sector policies, bank regulatory and supervisory policies remain impressively diverse in

2011. This diversity in regulatory regimes provides enormous scope for research examining both

the causes of these policy differences and the impacts of banking policies on the performance of

banks, and the associated ramifications for the overall financial sector and real economy.

30

References

Barth, James R., Gerard Caprio, Jr. and Ross Levine, 2001. “Bank Regulation and Supervision: A New Database,” in Robert Litan and Richard Herring, eds., Brookings-Wharton Papers on Financial Services.

__________________________________________, 2004. “Bank Regulation and Supervision:

What Works Best,” Journal of Financial Intermediation, Vol. 12, April, pp. 205-248. ________________________________________, 2006. Rethinking Bank Regulation: Till

Angels Govern, New York: Cambridge University Press. _________________________________________, 2008. Bank Regulations are Changing: For

Better or Worse?” Comparative Economic Studies, December, 50(4), 537-563. _______________________________________, 2012. Guardians of Finance: Making

Regulators Work for Us, Cambridge, MA: MIT Press. Barth, James R., Apanard (Penny) Prabha, 2012. “Breaking (Banks) Up is Hard to Do: New

Perspective on Too Big To Fail” Wharton Financial Institutions Center Working Paper 12-16. Available at http://fic.wharton.upenn.edu/fic/papers/12/12-16.pdf

Cihak, Martin, Asli Demirguc-Kunt, Maria Soledad, Martinez Peria, and Amin Mohseni-

Cheraghlou, 2012. “Bank Regulation and Supervision of Banks Around the World: A Crisis Update.” World Bank Policy Research Working Paper No. 6286.

Laeven, Luc, Fabian Valencia, 2008. “Systemic Banking Crises: A New Database,” IMF

Working Paper, No. 224.

31

Figure 1: Countries participating in the World Bank Surveys

32

Figure 2: Total bank assets / GDP

Panama

Macao, China

Indonesia

Philippines

Morocco

Jamaica

Oman

Argentina

-100% 100% 300% 500% 700% 900%

Countries with decreasing ratios from Survey I to IV

Survey IV Survey I minus IV

MaltaCyprus

United KingdomSwitzerlandNetherlands

SpainFrance

BelgiumPortugal

VenezuelaDenmark

GreeceNew Zealand

ItalyMalaysia

CanadaIsrael

SloveniaSouth Africa

VanuatuGermanyThailand

KuwaitMauritius

Korea, Rep.Chile

BrazilUnited States

IndiaRussiaPolandNepal

El SalvadorRomaniaGambia

MoldovaTonga

NigeriaBotswana

GuatemalaMexico

PeruGhana

Tajikistan

-100% 100% 300% 500% 700% 900%

Countries with increasing ratios from Survey I to IV

Survey I Survey IV minus I

33

Figure 3: Highest total bank assets / GDP ratio based on Surveys I-IV

0% 100% 200% 300% 400% 500% 600% 700% 800%

Tajikistan (IV)Kyrgyz Republic (IV)

Ghana (III)Peru (IV)

Mexico (IV)Burundi (III)Armenia (IV)

Guatemala (IV)Botswana (IV)

Nigeria (IV)Argentina (I)

Kenya (I)Lesotho (IV)

Bolivia (II)Bhutan (III)

Kazakstan (III)Moldova (IV)

Bosnia and Herzegovina (IV)Sri Lanka (III)Romania (IV)

Bangladesh (IV)Oman (I)

El Salvador (III)Honduras (IV)

Poland (IV)Russia (IV)

Belarus (IV)Trinidad and Tobago (IV)

India (IV)United States (IV)

Lithuania (IV)Morocco (I)

Philippines (I)Slovakia (II)Guyana (III)

Hungary (IV)Brazil (IV)

Bulgaria (IV)Chile (IV)

Korea, Rep. (IV)Latvia (III)

Croatia (IV)Kuwait (IV)

Egypt (III)Germany (IV)Thailand (II)

South Africa (IV)Estonia (IV)

Slovenia (IV)Vanuatu (II)

Israel (IV)Seychelles (II)

Virgin Islands, British (III)Australia (III)

Canada (IV)Malaysia (IV)

Italy (IV)New Zealand (IV)

Greece (IV)Jordan (III)

Mauritius (III)Denmark (IV)

Finland (IV)Taiwan (IV)

Macao, China (II)Portugal (IV)Lebanon (III)Austria (IV)France (IV)Spain (IV)Panama (I)

Belgium (III)Netherlands (III)

Iceland (III)Ireland (III)

Switzerland (III)United Kingdom (IV)

Singapore (IV)Cyprus (IV)Malta (IV)

Luxembourg (II)Guernsey (II)

6,500%

3,300%

814%

Survey with highest ratios for countries

Survey I: 6 Survey II: 8

Survey III: 19 Survey IV: 49

34

Figure 4: Percentage of assets accounted for by 5 largest banks

LesothoGuyana

Trinidad and TobagoJamaica

IsraelSeychelles

LiechtensteinBelgium

PeruCanada

El SalvadorBelarus

DenmarkMalawi

Korea, Rep.Guatemala

GibraltarGreece

Australia

Bosnia and Herzegovina

CroatiaChile

SlovakiaKazakhstan

BrazilHonduras

SwitzerlandItaly

SpainTurkey

MalaysiaKyrgyz Republic

ArgentinaPhilippines

PanamaUnited StatesLuxembourg

Germany

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Countries with increasing ratios from Survey I to IV

Survey I Survey IV minus I

BotswanaGambia

MaltaFinlandEstonia

BurundiNew Zealand

MauritiusLithuania

NetherlandsCyprusRussiaGhanaQatar

Puerto RicoChina

ThailandMacao, China

Moldova

BangladeshVenezuela

SloveniaBulgaria

KenyaRomania

Poland

NepalNigeria

ArmeniaGuernsey

IndiaAustria

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Countries with decreasing ratios from Survey I to IV

Survey IV Survey I minus IV

35

Figure 5: Percentage of total bank assets government owned

BelarusSri LankaSlovenia

ArgentinaVenezuela

Liechtenstein

United Kingdom

Nepal

Trinidad and Tobago

KazakhstanPortugal

Kyrgyz Republic

ChilePuerto RicoSwitzerland

TajikistanNetherlands

VanuatuTonga

PhilippinesMoldova

AustriaBotswanaGuernsey

LuxembourgKenya

Virgin Islands, British

HungaryNew Zealand

MauritiusDenmark

South Africa

0% 10% 20% 30% 40% 50% 60% 70% 80%

Countries with increasing ratios from Survey I to IV

Survey I Survey IV minus I

IndiaMaldivesRomania

BangladeshRussia

IcelandBurundiBhutan

JamaicaBrazil

LesothoMalawi

LithuaniaIndonesia

PolandQatar

TaiwanGermany

GhanaCroatiaTurkey

Thailand

Bosnia and Herzegovina

Korea, Rep.SlovakiaMexicoFinlandGuyana

BulgariaItaly

NigeriaGreece

PanamaGuatemala

El SalvadorCyprus

ArmeniaPeru

Macao, ChinaHonduras

0% 10% 20% 30% 40% 50% 60% 70% 80%

Countries with decreasing ratios from Survey I to IV

Survey IV Survey I minus IV

36

Figure 6: Percentage of total bank assets foreign owned

Cayman IslandsMacao, China

EstoniaLesothoJamaica

SlovakiaEl Salvador

Bosnia and HerzegovinaCroatiaMalta

MexicoRomaniaHungaryBulgariaGambia

Korea, Rep.Finland

SingaporeSeychellesMauritiusArmeniaPanamaPoland

MaldivesGuyana

HondurasPeru

Trinidad and Tobago

Kyrgyz RepublicMoldova

ChileCyprus

IndonesiaMalawi

SloveniaBelarusPortugalMalaysia

GreeceRussia

ItalyAustriaBrazil

KazakhstanTurkey

BurundiSwitzerland

GermanyGuatemala

IndiaBangladesh

TajikistanNigeria

Liechtenstein

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Countries with increasing ratios from Survey I to IV

Survey I Survey IV minus I

Guernsey

Tonga

Gibraltar

New Zealand

Botswana

Luxembourg

Ghana

Argentina

Nepal

Venezuela

Puerto Rico

Bhutan

Australia

Qatar

Philippines

Spain

Thailand

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Countries with decreasing ratios from Survey I to IV

Survey IV Survey I minus IV

37

Figure 7: Regulatory restrictions on bank activities and the mixing of banking and commerce: Percentage distribution of 126 countries in Survey I and 124 countries in Survey IV by degree of restrictiveness

62

58

7

10

19

18

15

14

16

40

39

43

68

49

29

20

24

45

67

38

14

19

30

27

34

40

47

59

40

44

9

6

19

40

42

48

38

8

1

4

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Unrestricted Permitted Restricted Prohibited

Nonfinancial firm ownership of

banks

Bank ownership of nonfinancial firms

Real estate

Insurance

Securities

I

IV

I

IV

I

IV

I

IV

I

IV

38

Figure 8: Change in the index of overall restrictions on bank activities: Surveys I to IV

-8 -6 -4 -2 0 2 4 6

Iceland, Jamaica, Kuwait, Virgin Islands British

Bahrain, Burundi, Egypt, Gibraltar, Liechtenstein, Malawi, Morocco

Australia, Austria, China, Finland, Greece, Guatemala, Italy, Kenya, Kosovo, Latvia, Lebanon, Lithuania, Nertherland,

Nicaragua, Peru, Philippines, Spain, United Kingdom

Armenia, Chile, Guernsey, Israel, Malta, Nigeria, Qatar, South Africa, Sri Lanka, Tajikistan, Trinidad and Tobago, United States

Banglades, Canada, Croatia, Denmark, Estonia, Maldives, Singapore, Taiwan

Urugu

Argentina, Botswana, Cayman Islands, Cyprus, France, India, Jordan, Macao China, Panama, Thailand

Bosnia and Herzegovina, Korea Rep., Luxembourg, New Zealand, Poland, Slovakia, Venezuela

Seychelles

Guyana, Moldova, Nepal, Tonga

Belgium, Bhutan, Bulgaria, Hungary, Indonesia, Mexico, Namibia

Belarus, Brazil, Puerto Rico

El Salvador

Romania

Ecuador, Gamibia, Ghana, Ireland, Mauritius,Oman, Portugal, Russia, Samoa (Western),

Slovenia, Switzerland, Turkey, Vanuatu

Less restricted

More restricted

39

Figure 9: Change in the index of bank capital regulations: Surveys I to IV

AustriaMexico

United KingdomArgentinaHungary

DenmarkGibraltar

Isle of ManPuerto Rico

South AfricaSri Lanka

BelgiumBosnia and Herzegovina

GhanaLiechtensteinNew Zealand

NigeriaPortugalSlovenia

SpainBenin

Burkina FasoCôte d'Ivoire

Guinea-BissauMali

NigerSenegal

TogoArmeniaBrazilEcuadorEstoniaFinlandGuernseyLesothoLuxembourgMaltaMauritiusNepalRussiaSeychellesSlovakia

ChileIrelandJordanLebanonMacao, ChinaMalaysiaMoroccoPolandQatarSingapore

BurundiAustraliaBelarusCanadaFranceGambiaGermanyGreeceGuatemalaHondurasItalyJamaicaKyrgyz RepublicMaldivesNamibiaNetherlandsOmanPanamaSamoa (Western) SwitzerlandTajikistanTongaUnited States

VanuatuBhutanBotswanaFijiIcelandIndiaIsraelKenyaKorea, Rep.KuwaitLithuaniaPeruVirgin Islands, British

Cayman IslandsBulgariaCroatiaGuyanaMoldovaPhilippinesRomaniaTaiwan

BahrainEgyptEl SalvadorIndonesiaLatviaMalawiThailandTrinidad and Tobago

CyprusBangladeshTurkeyVenezuela

-6 -4 -2 0 2 4 6 8

Less stringent

More stringent

40

Figure 10: Change in the index of official supervisory powers: Surveys I to IV

KazakhstanBotswanaColombiaLebanonParaguay

TunisiaUnited Arab Emirates

MoroccoEcuadorGibraltar

QatarTajikistanGuinea-Bissau

AngolaSamoa (Western)

ArmeniaBahrainCyprusFinlandIreland

BeninBurkina FasoCôte d'Ivoire

MaliNiger

Hong Kong, ChinaUkraine

ArgentinaDominican Republic

El SalvadorGreece

GuernseyJersey

Korea, Rep.SwitzerlandZimbabwe

MalaysiaSenegal

TogoNorwayIsle of Man

MozambiqueAustria

BelgiumBosnia and Herzegovina

BrazilBulgaria

EgyptFiji

HondurasHungaryJamaicaLesotho

New ZealandNicaragua

PakistanPanamaRussia

SurinamePortugal

NigeriaAustraliaBangladeshBelizeCayman IslandsCook IslandsGhanaGuatemalaKenyaKosovoKuwaitLuxembourgMadagascarMaldivesNamibiaOmanPhilippinesPolandSlovakiaSloveniaSpainSri LankaTanzaniaTongaUgandaUnited StatesUruguayVanuatu

Puerto RicoIsrael

BhutanCroatiaEstoniaGermanyIndonesiaMacao, ChinaMaltaTurkeyVenezuela

ChinaBurundiIndiaLithuaniaNepalPeruSouth Africa

GambiaLatviaVirgin Islands, BritishMexico

LiechtensteinDenmarkFranceKyrgyz RepublicMalawiMoldovaNetherlandsRomaniaTaiwan

ChileGuyanaThailand

SingaporeBelarus

CanadaJordanMauritius

IcelandItalyTrinidad and Tobago

Seychelles

-10 -8 -6 -4 -2 0 2 4 6 8 10

Less power

Greater power

41

Figure 11: Change in the index of private monitoring from Surveys I to IV

FinlandPhilippines

TajikistanBurundi

AustraliaBosnia and Herzegovina

El SalvadorGibraltarGuernseyMalaysia

MaltaOman

PortugalSuriname

ArmeniaBelize

BhutanBrazil

CanadaDenmark

EgyptGuatemala

Kyrgyz RepublicLatvia

LebanonMacao, China

MauritiusNamibia

New ZealandPanama

QatarSlovenia

TongaVirgin Islands, British

ArgentinaBahrainBotswanaBulgariaGambiaGuyanaHondurasIsraelJordanLiechtensteinLithuaniaLuxembourgMoldovaMoroccoPeruSingaporeSri LankaSwitzerlandTaiwanUnited KingdomVanuatuVenezuela

BelgiumCayman IslandsChinaGermanyHungaryIcelandJamaicaKenyaLesothoNetherlandsPolandRomaniaRussiaSouth AfricaSpainThailandTurkey

AustriaChileCyprusGreeceIndonesiaIrelandItalyMalawiMaldivesSlovakiaTrinidad and Tobago

BangladeshGhanaMexicoSeychellesUnited States

BelarusFranceIndia

-4 -3 -2 -1 0 1 2 3 4 5

Less empowerment

Greater empowerment

42

Figure 12: Change in the index of external governance from Surveys I to IV

MalaysiaPanama

FijiArgentinaFinland

Hong Kong, ChinaBulgaria

CroatiaHondurasMoldovaUnited Kingdom

AustraliaBotswanaEgyptEstoniaNew ZealandPakistanUruguay

IrelandAustriaBelgiumCyprusIcelandJamaicaLiechtensteinLuxembourgMacao, ChinaPeruSingaporeSouth AfricaSpain

NetherlandsLithuaniaUnited States

IndonesiaNigeria

ArmeniaMalawi

ChileGuatemala Seychelles

Italy

-2 -1 0 1 2 3 4 5 6 7 8

Less governance

Greater governance

43

Figure 13: Change in the index of deposit insurance from Surveys I to IV

OmanBosnia and Herzegovina

HungaryIceland

ItalyLiechtenstein

PeruSlovenia

VenezuelaCyprus

GuatemalaIndonesia

PhilippinesNigeria

GermanyKorea, Rep.

RussiaUkraine

ArmeniaAustriaBahrainBelarusBrazilBulgariaCanadaColombiaDenmarkEcuadorEl SalvadorEstoniaFinlandGibraltarGreeceHondurasHong Kong, ChinaIndiaIsle of ManJordanLebanonLithuaniaMoldovaNetherlandsPolandPortugalPuerto RicoRomaniaSingaporeSlovakiaSpainSri LankaSwitzerlandTrinidad and TobagoUnited States

ChileMalaysia

FranceArgentinaIrelandLatviaLuxembourgMaltaMexicoMoroccoNorwayTanzaniaThailandUgandaZimbabwe

TurkeyUnited Kingdom

KenyaBangladeshBelgiumJamaica

Croatia

-3 -2 -1 0 1 2 3

Less power

More power

44

Figure 14: Change in the index of entry into banking requirements: Surveys I to IV

CroatiaQatarAustriaBelarus

Belgium

Bosnia and Herzegovina

BotswanaGreece

Isle of ManLiechtenstein

MalawiNorway

South AfricaTanzania

JerseyKorea, Rep.

Hong Kong, ChinaArmeniaBangladeshCayman IslandsChinaEl SalvadorGambiaGibraltarGuernseyGuyanaHungaryIcelandIndonesiaIrelandMalaysiaMaldivesNew ZealandPakistanPhilippinesTurkeyUnited States

ArgentinaBurundiEgyptFranceIndiaIsraelMacao, ChinaPuerto RicoSeychellesTrinidad and Tobago

KuwaitGermany

ChileFinland

-3 -2 -1 0 1 2 3 4 5 6 7

More power

Less power

45

Figure 15: Bank supervisory criteria for assessing systemic risk (Number of countries reporting yes for each factor)

46

48

79

84

92

93

99

100

101

104

113

0 20 40 60 80 100 120

Stock market prices

Housing prices

FX position of banks

Bank leverage ratios

Bank provisioning ratios

Bank profitability ratios

Bank non-performing loan ratios

Growth in bank credit

Sectoral composition of bank loan portfolios

Bank liquidity ratios

Bank capital ratios

46

Figure 16: Statutory corporate tax rate on domestic bank income

GuyanaBangladesh

BrazilPuerto Rico

United StatesSuriname

IsraelAngolaArgentinaBurundiEthiopiaGambiaJordanMaltaMoroccoPakistanSri LankaTunisiaUruguay

NamibiaBelgium

FranceJamaica

ColombiaSeychelles

ItalyGuatemala

AustraliaBhutanCosta RicaIndiaKenyaMalawiNepalNew ZealandNicaraguaPanamaPeruPhilippinesSierra LeoneSpainSwazilandTanzaniaThailandUganda

PortugalCook IslandsFijiMexicoNorwaySouth AfricaUnited Kingdom

Samoa (Western) Finland

AustriaBotswanaDominican RepublicEcuadorEl SalvadorGhanaHondurasIndonesiaLesothoMalaysiaMaldivesNetherlandsSyriaTongaTrinidad and TobagoUkraineZimbabwe

BelarusGreece

MadagascarGibraltar

LuxembourgArmeniaCroatiaEgyptRussiaSloveniaTaiwanTurkey

HungaryPolandSlovakia

IcelandChileSingapore

Hong Kong, ChinaGermanyIraqLatviaLebanonLithuaniaMauritiusPalestinian Territory

IrelandLiechtenstein

Bosnia and HerzegovinaBulgariaCyprusIsle of ManJerseyKyrgyz RepublicParaguaySerbia

BahrainBelizeCayman IslandsEstoniaVanuatuVirgin Islands, British

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

47

Table 1: Some basic differences in banking systems around the world

Total bank

assets / GDP (percent)

Total bank claims on private

sector/ GDP (percent)

Number of banks per

100,000 people

Percent of total assets

accounted for by 5 largest

banks

Percent of total bank

assets government

owned

Percent of total bank

assets foreign owned

Professional supervisors

per bank

Percent of 10 biggest banks

rating by international

agencies Angola 34 21 0.1 79 19 59 N/A N/A Argentina 35 14 0.2 55 44 26 3.4 100 Armenia 46 26 0.7 46 0 67 1.7 20 Australia 155 151 0.2 77 0 13 9.2 100 Austria 349 N/A 9.9 35 12 18 N/A 80 Bahrain N/A N/A N/A N/A N/A N/A N/A 100 Bangladesh 64 46 0.03 38 34 7 N/A 0 Belarus 77 42 0.3 84 72 27 4.2 80 Belgium 331 N/A 1 91 0 60 0.8 50 Belize 89 62 N/A 100 0 100 N/A 0 Benin N/A 24 N/A N/A N/A N/A N/A N/A Bhutan 46 44 0.6 100 48 6 4.3 0 Bosnia and Herzegovina 60 55 0.5 76 1 92 2 N/A Botswana 52 25 0.5 92 7 93 3.9 0 Brazil 105 53 0.1 71 44 18 2.1 100 Bulgaria 105 N/A 0.4 54 3 81 2.7 100 Burkina Faso N/A 18 N/A N/A N/A N/A N/A N/A Burundi 35 17 0.1 87 49 16 3.3 N/A Canada 195 N/A N/A 86 0 N/A 0.8 70 Cayman Islands N/A N/A 437.5 38 0 100 0.1 0 Chile 107 74 0.1 74 19 39 4.1 60 China 189 N/A 0.02 63 N/A N/A N/A N/A Colombia 42 31 0.04 63 6 20 25.3 70 Cook Islands N/A N/A N/A 100 8 92 0.8 0 Costa Rica 64 47 0.3 78 54 31 7.4 70 Côte d'Ivoire N/A 18 N/A N/A N/A N/A N/A N/A Croatia 116 69 0.7 75 4 89 3.3 10 Cyprus 729 N/A 3.5 69 1 35 0.8 30 Denmark 245 N/A 2.2 83 1 21 N/A 70 Dominican Republic 33 22 0.1 87 31 8 10.8 80 Ecuador 36 29 0.2 70 17 2 4 N/A Egypt 64 27 0.05 N/A N/A N/A 11.8 70 El Salvador 63 40 0.2 85 6 93 10.1 50 Estonia 140 N/A 1.3 93 0 99 3.9 0 Ethiopia 25 N/A 0.02 84 61 0 1.7 N/A Fiji 78 65 0.6 100 0 100 5 80 Finland 256 N/A 1.8 91 0 74 0.7 60 France 368 N/A 1.1 87 2 12 N/A 100 Gambia 60 14 0.8 72 0 80 1.4 0 Germany 124 N/A 2.3 25 32 12 N/A 100 Ghana 37 14 0.1 45 10 51 5.4 0 Gibraltar N/A N/A N/A 79 0 100 0.5 0 Greece 212 N/A 0.2 78 11 21 6.1 80 Guatemala 46 23 0.1 80 2 10 10.4 80 Guernsey N/A N/A N/A 12 5 74 2 100 Guinea-Bissau N/A 6 N/A N/A N/A N/A N/A N/A Guyana 63 30 0.8 97 0 56 3.8 0 Honduras 73 49 0.2 69 1 50 6.7 70 Hong Kong, China 705 N/A 2.7 43 N/A N/A 1.1 100 Hungary 705 N/A 0.3 63 4 83 3.9 80 Iceland 193 115 1.6 100 41 0 5 0 India 80 51 0.01 38 74 7 8.3 100 Indonesia 47 26 0.1 50 38 34 7.7 90 Iraq 18 9 N/A N/A N/A N/A N/A N/A Ireland 483 N/A 1 72 21 63 1.6 100 Isle of Man N/A N/A 36.2 70 0 100 0.2 100 Israel 148 N/A 0.2 94 0 3 6.5 50 Italy 204 N/A 1.3 66 0.1 18 0.9 100 Jamaica 50 26 0.3 95 0 95 11.4 29 Jersey N/A N/A N/A 65 18 100 0.1 100 Jordan N/A 73 N/A N/A N/A N/A N/A 40 Kazakhstan N/A 39 0.2 72 23 17 1.1 100 Kenya N/A 33 0.1 50 5 37 1.4 80 Korea, Rep. 112 102 0.03 80 22 77 N/A 100 Kosovo 56 35 0.5 N/A N/A N/A 3.1 38 Kuwait 119 71 N/A N/A N/A N/A N/A 100 Kyrgyz Republic 26 N/A 0.4 55 20 46 2.6 0 Latvia N/A N/A 1.3 59 16 69 1.3 N/A Lebanon N/A 78 N/A N/A N/A N/A N/A 50 Lesotho 57 15 0.2 100 3 97 1.3 N/A Liechtenstein N/A N/A 47.2 92 29 4 0.3 20 Lithuania 86 N/A 0.6 80 0 81 3.1 90 Luxembourg 1942 N/A 29 31 5 94 0.3 40 Macao, China 238 57 5.2 73 0.2 99 0.6 30 Madagascar 24 N/A 0.05 82 0 100 1.9 0 Malawi 37 16 0.1 83 9 29 2.3 0

48

Total bank

assets / GDP (percent)

Total bank claims on private

sector/ GDP (percent)

Number of banks per

100,000 people

Percent of total assets

accounted for by 5 largest

banks

Percent of total bank

assets government

owned

Percent of total bank

assets foreign owned

Professional supervisors

per bank

Percent of 10 biggest banks

rating by international

agencies Malaysia 203 120 0.1 59 0 22 7.5 90 Maldives 98 57 1.9 98 39 61 1.8 0 Mali N/A 18 N/A N/A N/A N/A N/A N/A Malta 814 N/A 6.3 71 0 86 0.7 20 Mauritius 112 89 1.4 65 1 68 1.9 20 Mexico 42 19 0.04 74 13 85 10.8 100 Moldova 60 34 0.4 69 13 42 3.1 0 Montenegro 96 68 1.7 77 N/A 88 4 10 Morocco 88 69 N/A N/A N/A N/A N/A N/A Mozambique 37 28 0.1 92 0 92 N/A 0 Myanmar N/A N/A N/A N/A N/A N/A N